“A jury in London put the brakes Wednesday on an attempt to pin the world’s ills on “criminal bankers,” and not a moment too soon. That should cause a broader rethink on both sides of the Atlantic about political efforts to target bankers and fine banks for allegedly manipulating a benchmark interest rate…

…Wednesday’s acquittals of six traders who had been accused of conspiring with Mr. Hayes are a salutary reminder that not every banker engaged in Libor-related trades is a criminal. Evidence of discernible harm from the alleged Libor-rigging has always been thin. Class-action suits in the U.S. by investors who claimed they’d been hurt by rigged Libor readings flopped, and there’s evidence that banks misreported their interest rates in Libor-setting for their own and the financial system’s stability during the 2008 panic. Banks may have reported lower rates to appear to be in better health than they were. Regulators in London and New York also seem to have been aware at the time that this was happening and at a minimum didn’t intervene. Perhaps they recognized the financial system faced far greater problems—the result of monetary, housing, regulatory and other policies they had foisted on the banks. Such subtleties long ago got lost in the political and media frenzy over Libor allegations, so it’s a relief that ordinary citizens in a jury room are still willing and able to exercise independent judgment. Even better if six acquittals embarrass politicians who have spent the years since 2008 blaming “criminally greedy bankers” for a crisis born in part of their own regulatory malfeasance.”, The Wall Street Journal Editorial Board, January 28, 2016

Opinion

A Libor Liberation

Not every banker is a saint, but neither are they all criminals.

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PHOTO: GETTY IMAGES

A jury in London put the brakes Wednesday on an attempt to pin the world’s ills on “criminal bankers,” and not a moment too soon. That should cause a broader rethink on both sides of the Atlantic about political efforts to target bankers and fine banks for allegedly manipulating a benchmark interest rate.

Six bankers had been on trial for three months over charges that they fiddled with the London Interbank Offered Rate, or Libor, for fun and profit. Libor, which is calculated by the British Bankers Association daily from a poll of the interest rates banks charge each other, is used for pricing a range of derivatives and loans, such as mortgages. Regulators claim that banks and individual traders conspired to rig their reported interest rates to give themselves an advantage.

On the strength chiefly of florid press releases, authorities have extracted billions of dollars in fines from banks eager to make the issue go away. Prosecutors have secured convictions against some bankers, including London trader Tom Hayes in August, and Anthony Allen and Anthony Conti of Rabobank, who were convicted of Libor-related charges in New York in November.

Far be it from us to say that every banker is a saint. But Wednesday’s acquittals of six traders who had been accused of conspiring with Mr. Hayes are a salutary reminder that not every banker engaged in Libor-related trades is a criminal. Evidence of discernible harm from the alleged Libor-rigging has always been thin. Class-action suits in the U.S. by investors who claimed they’d been hurt by rigged Libor readings flopped, and there’s evidence that banks misreported their interest rates in Libor-setting for their own and the financial system’s stability during the 2008 panic.

Banks may have reported lower rates to appear to be in better health than they were. Regulators in London and New York also seem to have been aware at the time that this was happening and at a minimum didn’t intervene. Perhaps they recognized the financial system faced far greater problems—the result of monetary, housing, regulatory and other policies they had foisted on the banks.

Such subtleties long ago got lost in the political and media frenzy over Libor allegations, so it’s a relief that ordinary citizens in a jury room are still willing and able to exercise independent judgment. Even better if six acquittals embarrass politicians who have spent the years since 2008 blaming “criminally greedy bankers” for a crisis born in part of their own regulatory malfeasance.

 

Posted on February 1, 2016, in Postings. Bookmark the permalink. Leave a comment.

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